VAT - Flat Rate Rules Could Save Smaller Businesses Money
Many businesses struggle with the administrative burden of VAT. However for those with an annual tax- able turnover of less than £150,000, help is at hand with the flat rate scheme which can not only simplify matters - it might just save you some money too!
The standard way of calculating the VAT payable to the government is to net off the VAT element of costs against the VAT charged on sales. The flat rate system does away with all this. The trader is still required to charge the usual rate of VAT on all sales - but the gross sales are then multiplied by a set percentage to give the required payment to the government. That's all there is to it!
The percentages are set by HM Revenue & Customs and vary depending on the trade sector involved, reflecting the typical effective rate of VAT paid. For example, anyone retailing food, confectionery or tobacco will pay a flat rate of just 2% (most of the sales being zero-rated), whilst labour-only building and construction services will use a rate of 11.5% (a relatively high rate reflecting the lack of VAT reclaimable on costs).
As an extra incentive, newly registered traders can claim an extra 1% off their flat rate percentage for their first year of trading.
When the sums are done for your business you might just find that you currently pay over a bigger percentage of your sales than you would do if you applied the flat rate.
Should you need more information or are interested in adopting the flat rate scheme, please contact Charles Green on 020 8652 2450.
Should you need more information or are interested in adopting the flat rate scheme, please contact Charles Green on 020 8652 2450.
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